Government to Raise Income Tax on Average and High Incomes

New economic measures include raising the income tax for individuals who earn more than 5,200 shekels and raising “the rich people’s tax”.

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Elad Benari, Canada, 28/07/12 00:06

Netanyahu and Finance Minister Yuval Steinitz

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After announcing that the VAT will be raised and that an across-the-board cut for government ministries totaling 700 million shekels will take place, Prime Minister Binyamin Netanyahu and Finance Minister Yuval Steinitz announced more economic measures on Friday.

The latest measures include raising the income tax by 1% for individuals who earn between 5,200 shekels and 40,000 shekels per month.

Another measure will raise what is known as “the rich people’s tax” – the income tax paid by wealthier Israelis. The proposed measure calls to raise the income tax paid by those who have a capital income of 800,000 shekels or more. All the measures are expected to be brought before the Cabinet and approved on Monday. Shas has said it will oppose the measures, but Foreign Minister Avigdor Lieberman’s Yisrael Beytenu party has agreed to support them.

The latest measures are in addition to an order signed by Steinitz on Wednesday and which raised the tax on cigarettes and alcohol, especially beer.

As per the order, the cigarette tax was raised from 260.6% to 278.6% and the tax on beer rose from 2.18 shekels to 4.19 shekels. In addition, a tax at a rate of about 10% was imposed on vendors’ existing inventories of cigarettes.

Netanyahu, who has already faced criticism over the economic measures, was criticized again on Friday by Labor leader MK Shelly Yechimovich.

“You could get dizzy from the succession of conflicting economic decisions made by Netanyahu over the last three days,” said Yechimovich. “One day he imposes a VAT increase and protects income tax with all his might and the next day he imposes income tax increases.”

In response to the criticism, Netanyahu said, “We will not listen to the voices of those inexperienced and irresponsible populists who say that the State can spend money recklessly.

“We’ll collect more from those who have more and we’ll collect less from those who have less,” he added. “We will not act like other countries that irresponsibly brought upon themselves huge deficits, a prolonged recession and mass layoffs.”

Steinitz, meanwhile, defended the economic measures in an interview with Channel 2 News on Friday.

“For three and a half years we’ve been guarding Israel from the worst global economic crisis since its establishment,” he said. “There is no mass unemployment here like in other countries. Why? Because we behave boldly and with fiscal responsibility.

“We must understand that if we do not act responsibly and wisely, what is happening in Spain and Greece will also happen here,” added Steinitz. “The Israeli economy is in relatively good shape compared to America and Europe. Our goal is to broadcast to the world that we will continue to maintain Israel's economy.”

He added, “I hope we won’t require further measures. We'll get billions from the foreign companies that operate in Israel. I take into account the credit rating agencies, and we are one of the few countries in the West whose credit rating hasn’t been lowered.”

(Arutz Sheva’s North American Desk is keeping you updated until the start of Shabbat in New York. The time posted automatically on all Arutz Sheva articles, however, is Israeli time.)